Proceedings of the 2022 2nd International Conference on Education, Information Management and Service Science (EIMSS 2022)

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A Study on the Path to Reducing Tesla’s Transaction Exposure in China—Base on Hedge Models

Authors
Yao Jia1, *
1University of Delaware, Newark, Delaware, USA
*Corresponding author. Email: Rzjy19991014@gmail.com
Corresponding Author
Yao Jia
Available Online 12 December 2022.
DOI
10.2991/978-94-6463-024-4_21How to use a DOI?
Keywords
Tesla; Transaction Exposure; Exchange Rate; Hedge
Abstract

Transaction exposure is a large risk for a multinational company. It measures gains or losses that arise from the settlement of existing financial obligations whose terms are stated in a foreign currency. The capacity at Tesla’s Shanghai factory is going to reach 550,000 in 2021. With such a huge capacity in Chinese market, a small change in exchange rate can bring a large loss in Tesla’s revenue. Therefore, they need to convert their revenue to the U.S. dollar in an effective way. In current years, the exchange rate between China yuan and the U.S. dollar is unstable because of the trade war and the pandemic. Based on current three years exchange rate, if Tesla decides to remain unhedged with the currency risk, it may cause up to $13,629.61 loss in revenue for each 1,000,000 China yuan convert to the U.S. dollar. The purpose of this research is to analyze the current exchange rate between China yuan and the U.S. dollar, evaluate the feasibility of each hedge, and suggest the best option to reduce the transaction risk of Tesla. Based on the data from Tesla’s annual report, this research creates models with Excel and Tableau to analyze all the situations. With the results of each hedge model, the research outlines the difficulties and advantages of these hedges, but accurately presents a best-case scenario that works for Tesla.

Copyright
© 2023 The Author(s)
Open Access
Open Access This chapter is licensed under the terms of the Creative Commons Attribution-NonCommercial 4.0 International License (http://creativecommons.org/licenses/by-nc/4.0/), which permits any noncommercial use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license and indicate if changes were made.

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Volume Title
Proceedings of the 2022 2nd International Conference on Education, Information Management and Service Science (EIMSS 2022)
Series
Atlantis Highlights in Computer Sciences
Publication Date
12 December 2022
ISBN
10.2991/978-94-6463-024-4_21
ISSN
2589-4900
DOI
10.2991/978-94-6463-024-4_21How to use a DOI?
Copyright
© 2023 The Author(s)
Open Access
Open Access This chapter is licensed under the terms of the Creative Commons Attribution-NonCommercial 4.0 International License (http://creativecommons.org/licenses/by-nc/4.0/), which permits any noncommercial use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license and indicate if changes were made.

Cite this article

risenwbib
TY  - CONF
AU  - Yao Jia
PY  - 2022
DA  - 2022/12/12
TI  - A Study on the Path to Reducing Tesla’s Transaction Exposure in China—Base on Hedge Models
BT  - Proceedings of the 2022 2nd International Conference on Education, Information Management and Service Science (EIMSS 2022)
PB  - Atlantis Press
SP  - 193
EP  - 199
SN  - 2589-4900
UR  - https://doi.org/10.2991/978-94-6463-024-4_21
DO  - 10.2991/978-94-6463-024-4_21
ID  - Jia2022
ER  -